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Insights into the labour market and increasing basis points

  • Jason Ellis, Managing Director, Capital Markets

Good Morning,

Just a quick note today…lots of catching up to do after a couple of days in Halifax with some great Haligonians from both the commercial and residential markets.  Good people.  Good beer. 

Employment Data
Nonfarm Payrolls were expected to confirm that the labour market is in good health but the data came in a little on the disappointing side this morning.  The US economy added ‘just’ 138,000 jobs compared to 182,000 expected.  Last months reported gain of 211,000 jobs was also revised lower by 66,000.  Despite this, the jobless rate fell from 4.4% to 4.3%.

Bond prices jumped and yields fell by about 3 basis points immediately following the news.  Today’s report may be just weak enough to soften the almost unanimous market expectation for another rate hike at the next US FOMC meeting.  Canadian employment data for May is due next Friday.

Yields
5 year Canada bonds are trading at 0.92% post FOMC as compared to 0.96% last Friday and 0.99% four weeks ago.  By comparison, the 5 year US Treasury bond is currently trading at 1.72% or about 80 basis points higher than the GoC.  Year to date, that’s right on the average but the spread has ranged from 71 basis points to 89 basis points.

10 year Canada bonds are trading at 1.40% post FOMC as compared to 1.44% last Friday and 1.54% four weeks ago.  By comparison, the 10 year US Treasury bond is currently trading at 2.17% or about 78 basis points higher.  Year to date, the average spread has been 75 basis points with a range of 65 to 83.

Other Stuff
CEO’s from some of the largest corporations have expressed their dismay at Donald Trump’s intention to exit the Paris Climate change accord.  One notable supporter emerged from the critics though.  International villain and “one…hundred…billionaire” playboy Dr. Evil came out strongly in support of the decision.  Dr. Evil was quoted as saying “Trump has the sort of general malaise that only the genius possesses and the insane lament”. In response, Trump was quoted as saying “COVFEFE”.  Genius indeed.

Have a great weekend,

Treasury Guy
Jason Ellis, Managing Director, Capital Markets